In what is both a give and a take for India, the G20 Summit ended here Friday with a declaration that while countries will not prolong the exit of fiscal stimulus, it will be done in a calibrated way and clearly communicated in a bid to prevent volatility in currency markets.
“We remain mindful of the risks and unintended negative side effects of extended periods of monetary easing,” said the 27-page declaration, adding that central banks will continue to direct their monetary policies towards what their domestic constituency demands.
This can be seen as a major dampener for emerging markets like India that blame the unconventional monetary policy interventions of rich nations, such as the fiscal stimulus and the threats of their abrupt withdrawal, for the volatility in their currency markets.
But there were some concessions as well. “Our central banks have committed that future changes to monetary policy settings will continue to be carefully calibrated and clearly communicated,” the declaration said and added a commitment that the central banks will desist from some policies that can clearly promote volatility.
This, along with the need for careful calibration of quantitative easing, which rich countries had instituted to overcome the economic crisis that surfaced in 2008, were among the points raised by Prime Minister Manmohan Singh at the two-day summit.
Briefing journalists later, India’s Department of Economic Affairs Secretary Arvind Mayaram also sought to highlight these points as positive outcomes for India.
India has been concerned over the unconventional monetary policies, especially in the US, as it has held threats of their abrupt withdrawal the main reason behind the depreciation of the rupee by almost 20% against the US dollar since the beginning of the current financial year. The currency had recently hit a record low of near 69 against a dollar.